Calls On Louisiana Legislature To End Refundable Corporate Tax Credits!!!

For Immediate Release April 13, 2015

BATON ROUGE - The Tea Party of Louisiana wants to make its position on ending refundable corporate tax credits "perfectly clear" – END THEM ALL NOW!!!

TPoL is against all forms of corporate refundable tax credits. Period! Refundable tax credits, like Solar Tax Credits, are nothing more than a clever scheme to circumvent our state constitution and enable the payment of public funds to private entities. This is "crony capitalism" at its absolute worst. Even when used to address a legitimate problem, such as the uncompetitive nature of local inventory taxes, such credits are still improper, because the tax credits merely cover up the problem allowing it to continue, thus allowing the legislature to avoid the hard work of fixing the problem. TPoL therefore calls on the Louisiana legislature to do its job and protect the average tax payer by stopping the corporate crony give aways.

A particularly abusive corporate give away is the solar energy tax credit. This tax credit is based on "junk science" and the fantasy that a home owner can "live off the grid". Power must be generated at the time of consumption, and this power must be available 24/7. One day, hundreds of years from now, solar technology may solve many problems and be economically competitive with conventional power generation, and when that day comes no subsidies will be necessary because free market forces will be sufficient to support solar energy. Until that day comes let's stop robbing average people and breaking the state budget so a few well connected fat cats can keep getting their unreasonable corporate give aways.

In light of Louisiana's current budget situation, let's end the insane give aways that are called "refundable tax credits" and let's start by killing the solar tax credit, the worst abuser of all.

Reference enclosure: Please refer to a few facts we have attached to this release about the solar tax credit complied by Dr Jim Richardson, a nationally recognized economist from LSU.

SOLAR TAX CREDIT FACTS

Louisiana’s solar tax credits are the most lucrative in the United States. Yet, Louisiana ranks 44th (6th lowest) in the nation in terms of job creation. The solar industry in Louisiana boasts around 1,200 jobs created. That is down from 1,400 while the credit still goes up by millions every year.

Alabama has no state solar tax credit and yet the solar industry has created 500 jobs.

The fiscal note that accompanied the 2007 legislation also estimated no more than $500,000 in annual cost to the state. It is estimated that since the credit was enacted in 2007, solar tax credits have cost the state of Louisiana over $150 million.

Solar tax credits negatively impacted Louisiana’s budget revenues by $63,441,215 in 2014. In other words, there was $63,441,215 less revenue for the state of Louisiana to spend on higher education, health care, highways and other areas of need because of solar tax credits.

Of the over $63 million, the State of Louisiana wrote checks drawn on the State Treasury totaling $57,160,387. That is because the solar tax credit is refundable to homeowners who receive solar tax credits that exceed their actual income tax liabilities. Therefore, over 90% of the solar credits granted by the state exceeded the Louisiana tax liability of the entities claiming the credit.

It has been found that in states with no (or lower) solar tax credits, the solar panel units are generally less expensive to the consumer than they are in Louisiana. In other words, Louisiana’s solar tax credits are actually helping to inflate the price of solar equipment in Louisiana so that companies can claim a greater tax credit.

When solar tax credit legislation originally passed in 2007, the fiscal note’s stated intent was to help stimulate the solar energy industry in the state. Orleans Parish now has among the highest residential solar installation rates in the continental United States (NOLA is on par with San Diego and San Francisco only outdone by Hawaii where electric rates are some of the highest in the nation).

Because installations of rooftop solar systems keep growing, the amount of solar credits exponentially increases each year. This has made it impossible for the Legislature to anticipate the fiscal impact of solar tax credits as it prepares the state’s budget.

In general, for a local solar industry to grow you need three things: 1) lots of sun; 2) high electricity rates; and/or 3) generous tax incentives. Well, Louisiana only has one out of the three: generous tax credits. We do not have nearly the sun that other states like AZ, CA, and HI enjoy, and we have some of the lowest costs of power in the entire country.

The Federal government currently offers a 30% tax credit against federal income taxes for the purchase and installation of solar energy systems. In addition, Louisiana currently provides an additional 50% credit for the purchase and installation of a solar energy system on residential property. If a solar energy system is installed on a residence through the use of a lease arrangement with a third party, the solar tax credit is 38%.

Consumers that lease solar systems from third parties have found that promised utility bill savings are inflated and never fully realized. In early 2014, a class action lawsuit was filed against the largest at the time solar leasing company in New Orleans alleging various instances of fraud and abuse.

States like CA and AZ with large numbers of rooftop solar systems are also beginning to report problems with homeowners not being able to sell their homes because of needing to transfer the solar lease to the buyer. Several members of Congress have asked the Federal Trade Commission to investigate these problems.

Dr. Jim Richardson, a member of the Revenue Estimating Conference, suggested to the Joint Committees of House Ways and Means and Senate Revenue and Fiscal Affairs on March 10, 2015 that the Legislature should treat this subsidy to the solar industry as an expenditure program in the budget (not a tax credit program) and decide to what degree the state wishes to contribute to this alternative energy source. This change would cap the program such that the Legislature will have a known amount when preparing the annual budget.

A recently released study, commissioned by the Louisiana Public Service Commission, further details the overall cost/benefit of solar policies in Louisiana including the state tax credits. The median household income of solar energy system residences is $60,460 whereas the statewide median income in Louisiana is $44,673. In addition to the cost of solar tax credits to Louisiana’s tax payers, non-solar residential electricity customers actually subsidize solar residential customers by millions of dollars per year. In other words, while the State has financially encouraged the purchase and installation of solar energy systems, which has unquestionably grown the solar industry, it has also resulted in financially harming non-solar customers who are left to cover the infrastructure costs of supplying reliable electricity to all consumers, even on days when the sun is not shining. To make this even more egregious, lower-income households are less likely to be able to take advantage of the solar tax credits and thus are subsidizing higher income solar energy system users.